Perimetric Insurance Study Set

Creditor id the Policyowner

In credit life insurance, the creditor is the policyowner and the beneficiary; the debtor is the insured.

Which of the following would NOT be considered a deceptive act?

Projecting future dividends not based on the actual scale used by the company Using misleading language or making promises to a policyholder are among actions considered deceptive.

Which of the following is issued by the state Department of Insurance to show that the insurer has power to write insurance contracts in that state?

a) License A Certificate of Authority is issued by the state Department of Insurance and shows that the insurer has power to write insurance contracts in that state.

Which of the following is an example of liquidity in a life insurance contract?

a) The money in a savings account

Which of the following is NOT the consideration in a policy?

a) The promise to pay covered losses

Spouse Term Rider

a) The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65. A spouse term rider (just like any other insured rider) is usually level term insurance.

What is the name of the insured who enters into a viatical settlement?

a) Contingent

Reciprocity

a) "Reciprocity" occurs when the state in which the person resides accords the same privilege to residents of Arizona.

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

a) Accumulation at Interest

Deceptive Act

a) Comparing an insured's current policy with a potential replacement policy b) Promising benefits, privileges, or rights that are not stated in the policy c) Using confusing and misleading terms in describing a policy

Which of the following is true about credit life insurance?

a) Debtor is the annuitant.

A producer in New Mexico wants to become a producer in Arizona. The Department will waive certain examination requirements, provided that New Mexico would waive these same requirements if an Arizona producer sought licensure in New Mexico. What term is used to describe this phenomenon?

a) Equanimity

Limited-pay Life

a) In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.

Cash Value

a) Liquidity in life insurance refers to availability of cash to the insured. Some life insurance policies offer cash values that can be borrowed at any time and used for immediate needs.

During the accumulation period in a nonqualified annuity, what are the tax consequences of a withdrawal?

a) Neither interest nor principal is taxed, but penalties may be imposed. When money is withdrawn from the annuity during the accumulation phase, the amounts are taxed on a last in first out basis (LIFO). Therefore, all withdrawals will be taxable until the owner's cost basis is reached.

For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are

a) Never tax deductible. Individuals who are not covered by an employer-sponsored plan may deduct the full amount of their IRA contributions regardless of their income level.

What is the advantage of having a qualified annuity?

a) Receiving a lump-sum settlement tax free Those annuities meeting the IRS guidelines receive favorable tax treatment for funding qualified retirement plans.

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

a) Survivorship Life Policy

Cost Living Rider

a) The Cost of Living Rider annually adjusts the policy's face value in accordance with the national rate of inflation or deflation. This provision allows for the relative value of the policy to remain constant over time, despite changes in the economy. The Cost of Living Rider adjusts the face amount of the policy to correspond with the rate of inflation, in order to keep the initial value of the policy constant over time.

A long stretch of national economic hardship causes a 7% rate of inflation. Devonne notices that the face value of her life insurance policy has been raised 7% as a result. What is the name of the provision that caused this change?

a) Value Adjustment Rider

Both Universal Life and Variable Universal Life have a

a) Increasing premium. Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, so long as there is enough value in the policy to fund the death benefit.

Joint Life Policy

a) Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

Accumulation Period of an Annuity

a) It would not occur in a deferred annuity. b) It is the period over which the annuitant makes payments into an annuity. c) It is also known as the pay-in period. The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).

The paid-up addition option uses the dividend

a) To reduce the next year's premium. The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.

Viator

a) Viator means the owner of a life insurance policy who enters into or seeks to enter into a viatical settlement contract.

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

a) Variable Life

Straight Life Policy

a) Its premium steadily decreases over time, in response to its growing cash value. b) The face value of the policy is paid to the insured at age 100. c) It usually develops cash value by the end of the third policy year. Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

Reduction Premium

a) The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.

Which of the following is NOT true regarding the accumulation period of an annuity?

a) It is the period during which the annuity payments earn interest. The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).

Which is true about a spouse term rider?

a) The rider is decreasing term insurance.

All of the following are factors that an underwriter could use to select and classify risk EXCEPT

a) Avocation. The company will discriminate in favor of good risks and not of poor risks; however, it cannot discriminate unfairly by using factors such as race or national origin in their underwriting.

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?

a) Blackout approach Human life value approach is determined by the loss of income that would result with the death of the insured, after making adjustments for expenses, inflation, etc.